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Monday, December 2, 2013

A Bitcoin ETF? How about a Bitcoin CFD.

I receive more and more questions about Bitcoin lately, mainly about how to trade the highly controversial digital currency and what my take is. And no wonder, a year ago on this date Bitcoin traded a little over $12. Now it's trading well over a $1000 (!!), and last week it came close to the price of an ounce of gold! There's a lot of speculation going around that Bitcoin will trade even higher, and some even claim it's worth about 100 times even more its current value. Of course I'm referring to the Winklevoss twins who recently announced on CNBC that they want to launch a Bitcoin ETF. Regardless what they have to say, the overall sentiment is tremendously bullish. Will there eventually be a Bitcoin ETF? Maybe, if it makes it through regulations.

Whatever the case is, actually buying Bitcoin isn't difficult, just go to coinbase.com and there you go. But what if you want to trade Bitcoin like it's a stock? There's no ETF yet, but there is a CFD, and most online brokers offer Bitcoin CFD's. If you're unfamiliar with CFD's, it stands for Contract For Difference. In other words, you'll never actually own Bitcoin, but are speculating on its price movement (difference bid/ask). If you think Bitcoin is highly overvalued, or undervalued you can place your bets with a Bitcoin CFD. Think of it as options, though you never own the underlying asset, you can still speculate on its price.

Bitcoin chart over the year

Personally I'm not a big fan of Bitcoin. The reason is that it's way too volatile and risky. If you look at the chart above you can see that the digital currency really gained a lot of value in November, but what goes up that quickly may also go down as fast as well. Investors and traders who are willing to take on some risk and make good money may find this... commodity something that's worth their time. Like I said, I'm staying away from it like the plague. There's lots of other great investments that have a high risk/high payout ratio, where the risk is even lower, like currency trading or trading CFD's that aren't Bitcoin. However, if you still think you will strike it rich with Bitcoin, look for a broker that offers Bitcoin CFD's like Plus 500.

Disclaimer:

All opinions expressed, trade recommendations/advice on this website are solely of John van der Munnik and are not affiliated with any investment firm or any other organization. You should not make an investment only based using this website VDM Trading for your trading needs without seeking help from your own financial advisor.